Investors riot at Karachi stock market

Hundreds of furious Pakistani investors have rioted at the Karachi Stock Exchange after shares plummeted from last week's record highs.

24 Mar 2005 11:58 GMT

Small investors were angered by controls on sale of falling stocks

Officials said police were called in as around 400 small investors who had been prevented from offloading their falling stocks, hurled stones and smashed up cars and office windows in the building's courtyard on Wednesday.

"We have arrested five people and the situation is now under control," senior police officer Sanaullah Abbasi said.

The unrest broke out as the KSE-100 (Karachi Stock Exchange) continued to fall for a sixth consecutive day, from the record of 10,304.72 points on 15 March to 8367 points at lunch time on Wednesday.

"The market has been down for many days now, resulting in some stone-throwing outside the KSE. But the situation at the Islamabad Stock Exchange is calm and peaceful," Waris Niazi the associate manager in the bourse's department of investor relations, told Aljazeera.net.

Further decline

Niazi said: "There has been overselling in the market, which has caused share prices to fall. The sitaution can be resolved if financial institutions and banks step into the stock market and start buying shares to bring back stability.

"If big institutions do not come into the market then there may be a further decline in share prices."

Pakistan's stock-market gainsreflect its economic recovery

Under rules designed to prevent the market going into free fall, the management suspended trading in a number of key blue chip shares when they dropped by 5% or more.

"This gives small investors no opportunity to sell out their holdings because trading is locked by the management to avoid crash," Humaira Zaheer, head of research at Capital One Equities, said.

Trading in other shares that have not been suspended was continuing, although the management had locked the main trading hall, officials said.

Historic recovery

Television footage showed crowds of angry people rallying outside the stock exchange and pick-up trucks full of armed riot police racing towards the scene.

Dealers had said last week that the breaking of 10,000 point barrier marked a historic recovery for the KSE, which hit a low of 1401 points on 15 March 2001.

The Pakistani market had floundered for years leading up to the 11 September 2001 strikes on New York and Washington, but Islamabad then won a string of economic concessions after backing the US.

This included a rescheduling of its $12.3 billion loan under a Paris Club agreement, coupled with billions of dollars in aid and grants which have bolstered foreign reserves by about 12 times to more than $12 billion.